A corporate tax code for a different century

By David Cay Johnston
January 13, 2012

Big business is lobbying for a major cut in the corporate income tax rate, and both President Barack Obama and key congressional leaders are on their side. But the evidence that a rate cut will boost the economy is weak. What’s needed is comprehensive reform that includes a simpler, fairer and more transparent corporate tax code. But more on that later.

Consider what President George W. Bush‘s Treasury Department said in a report in 2007: big countries, such as the United States, receive far less economic benefit from lower corporate tax rates than smaller countries do. For large countries, cutting corporate tax rates “would result partly in increased capital inflow and partly in lower world interest rates.”

While other large countries have cut their corporate tax rates since then, lowering the U.S. rate would just encourage other countries to go even lower. Since we are cutting spending in the very areas that build wealth – education, infrastructure and research – a corporate tax rate cut would increase the pressure for further cuts in those areas, making us poorer.

The RATE Coalition, a group of 23 businesses and two trade associations, is among leading advocates for a cut in the corporate income tax rate from the current 35 percent. But it also wants that cut to be a part of fundamental reform.

A cut of 10 percentage points would increase economic output by 1 to 2 percentage points, the coalition says on its website, citing a study by economists Roger H. Gordon of the University of California San Diego and Young Lee of Hanyang University in Seoul. But Gordon told me that while the paper shows that “lower corporate tax rates are associated with more rapid economic growth,” that point comes with a caveat.

“We found these results only … for non-OECD (poorer) countries,” he emailed – there was no statistical relationship between lower corporate tax rates and faster economic growth among OECD countries, a coalition of 34 modern states spanning the globe and including the United States.

LITTLE DIFFERENCE

Ten of the RATE members have made detailed tax disclosures to shareholders, allowing Citizens for Tax Justice to compare their tax rates on profits earned in the United States to their rates on overseas profits. Its recent study showed that five of the 10 RATE members paid higher rates on their U.S. profits than on their foreign profits in 2008 through 2010. The other five paid lower U.S. tax rates.

Add up the figures from all 10 companies and their average U.S. tax rate was just 0.88 percentage points higher than their non-U.S. rate. That is not much of a difference, either to the companies or the U.S. economy.

The RATE Coalition has two chairs, one from each party, each with strong Washington ties. Its spokeswoman offered Democrat Elaine Kamarck, a public policy lecturer at Harvard’s John F. Kennedy School of Government, to answer questions. Kamarck said that the enduring economic doldrums and election year politics this year “almost inevitably lead to a big tax reform debate in 2013.”

“We see an interesting political consensus,” she said. Corporations want lower rates, the government needs more revenue and since the 1986 Tax Reform Act the corporate tax laws have become overgrown with favors, especially for multinational companies. Getting lower rates, she said, has to include removing many favors to level the playing field so profits are taxed evenly, not more for some industries and less for others as today.

Significantly, the RATE coalition, one of several corporate coalitions competing to shape changes in tax law next year, includes associations of retailers and railroads, both of whose tax issues are almost entirely domestic. Some of its members have spoken against the proposed tax holiday for bringing home untaxed overseas profits. The coalition does not oppose any repatriation deal for multinational companies, but says such a deal should be debated only in the context of fundamental reform.

Kamarck said she agreed with one of the major themes of this column – which is that our tax code was built for the national, industrial, wage economy of the 20th Century, creating problems for the global, services, digital economy of the 21st Century.

So why is the RATE Coalition not first promoting fundamental reform, a tabula rasa approach, and only then talking of tax rate cuts? That, she said, is just not politically doable in the next two years. Let’s hope she is wrong. Washington has done it before, in 1986. Why not again?

37 comments

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How about starting with the notion that organizations, whether for profit or not, that increase national taxable income or increase the number of jobs held by citizens in the territory of the USA get tax breaks and access to loan guarantees. Otherwise, no research credits, no tax credits of any kind, no abatements, reductions or discounts at any level of government, and no access to any form of money from guarantees, “insurance” or any other pool of public money to cover losses.

Why do we care about organizations that do not benefit ordinary citizens? No more Bain Capital flim flam where the taxpayer foots the bill and the rich profit.

Posted by txgadfly | Report as abusive

I think that if corporations are people they should be taxed like people. That is to say: if they have the rights of people then they have the responsibilities of people. That includes being taxed. I have long supported lowering or eliminating taxes on corporations – until recently, thanks to the Supreme Court. I’m a staunch capitalist but I do not accept the idea of corporations having it both ways.

Posted by RynoM | Report as abusive

Your point from a previous column that tax meant to work like oil, becomes sand in the gears as the economy changes is well taken. Not to say we do not need taxes, we do, but we must note that the economy is structurally transforming.

Anyone who does not see that ought to google: toyota, shop floor, and robots. You will see those very reliable cars being made without a human in view. Wow. Efficient production. But wow again… what about the distribution of income? It ain’t.

Industrial and robotic efficiency is good, but not with last centuries assumptions about work distributing income, and taxes coming from that. The New Economics (nef) Foundation is now proposing a 21 hour work week.

We have dinosaurs lobbying for industrial growth just as the buggy whip guild lobbied against the automobile. Whoa. And politicians are discussing private equity take-over models. What about distribution?

Whoa. The world is changed, and our taxation had better keep up, or we will go the way of the Anastazi. My question is how can we get politicians to discuss this (civilly) when we cannot even get economists to model an economy that can respond to global climate change? It is easy when 2% of us produce all our food. Where are the brains?

Posted by TheOldSodbuster | Report as abusive

“What’s needed is comprehensive reform that includes a simpler, fairer and more transparent corporate tax code. But more on that later.”

Really? Like all “sound bites” that sounds great, but I missed what you thing that might be in the article. Perhaps you could expand on that idea in another article sometime.

If we want to start comparing corporate tax rates, which has a built-in bias for the wealthy on their argument to cut their tax rates to zero, we should take a look at the “whole enchilada” so to speak.

AND we should forget about non-OECD countries, because frankly its “apples to oranges” on that one.

In order to get reliable data, we would need to examine the WHOLE tax and benefits structure of perhaps two or three OECD countries before we can really determine if cutting corporate taxes is a valid idea or not.

Why the whole tax and benefits structure, and not just the tax rates?

Obviously, because they are simply two sides of the same coin — taxes are used (or should be) to support government spending, including social programs.

In the OECD, those taxes and social programs taken as a whole are MASSIVE compared to the US, which has virtually no social benefits programs at all.

In the US, if you “fall through the cracks” you simply disappear from government/public view, which is much harder to do in the OECD countries.

Basically, the US operates on the old Protestant Work Ethic, which means essentially that if you don’t work, you don’t deserve benefits.

So, bring on your “real” line item by line item” comparison of taxes and benefits, and I think the US will stink in every single category, except its predilection for and efficiency in making sure the wealthy get far more preferential treatment than anyone else.

By the way, you skipped a VERY important point in talking about wanting to lower corporate tax rates, and that is the money the corporations have squirreled away in various locations around the world, on which they pay absolutely NO US tax at all, except when it is repatriated to the US.

Wanna’ guess when they do that?

NEVER!

So, if we’re talking about adjusting corporate tax rates, how about putting all the “cards” on the table.

Otherwise, we are just setting ourselves up to be scammed by the whining wealthy — again.

PseudoTurtle
CPA/MBA

Posted by Gordon2352 | Report as abusive

@Gordon2352,

PseudoTurtle, you’re trying to sell us the view from inside your shell! Stick your head out, refocus your eyes and look at the REAL world!

OECD” is the Organisation for Economic Co-operation and Development. The United States joined in 1961. The “work product” is decisions. Implementation of such decisions is discretionary, i.e. up to “member” governments.

You admit that “…the US operates on the old Protestant Work Ethic, which means essentially that if you don’t work, you don’t deserve benefits.” Most Americans share this perspective. They do not want to encourage sloth and freeloading on the public teat. You infer that the “American system” is somehow deficient, socially inappropriate and unfair. I fundamentally disagree.

You propose that America “…examine the WHOLE tax and benefits structure of perhaps two or three of 34 “…OECD countries before we can really determine if cutting corporate taxes is a valid idea or not.” I’m sure YOU want to pick those two or three to “prove” that the United States “has virtually no social benefits programs at all” and should increase such spending.

You can’t credibly advocate such a position if your CPA/MBA is other than ivory tower academic puffery. Every credible economist seems well aware that America is broke, having spent more than available tax revenue for far, far too long on economically unsustainable promises to unionized government workers and others and its citizens.

Our “ship of state” is under way at sea with leaks that seriously threaten it’s long term seaworthiness. Instead of plugging the holes as fast as we can, you propose ripping the whole bottom off for complete replacement. Please don’t take it personally if I believe you are out of your mind. If you want to live in Europe, MOVE THERE!

Americans don’t intend to be scammed by the unqualified, the unwilling, the uneducated, the unmotivated, the unemployed, the unsuccessful, etc. who can only drag America down. We prefer to be inspired instead by the qualified, the willing, the educated, the motivated, the employed and the successful who make our country all that it can be.

We understand and accept that, by definition, for everyone “above average” there is someone “below average”. We understand and accept that for there to be winners there must be losers. We understand and accept that everybody doesn’t get a trophy in the game of life. Why don’t YOU?

Posted by OneOfTheSheep | Report as abusive

OneOfTheSheep, you wrote:

“We understand and accept that for there to be winners there must be losers. We understand and accept that everybody doesn’t get a trophy in the game of life.”

I would say we also understand that the little people are getting hosed by corporate greed and it’s our country, and we’ll make the rules.

Posted by visceralcarnage | Report as abusive

Or, if you can’t follow my logic above, let’s do it your way, and take corporate taxes as a single line-item issue.

In this case we need to forget about what other countries are doing and look at the impact on the US economy alone (which makes your approach incorrect anyhow, but since I pointed that out above I don’t need to cover the same ground again).

If we dropped corporate taxes in the US, basically two things would happen:

(1) the US corporations, who are already sitting on more cash than they have at any time in our history (but simply refuse to invest it in this country because the returns aren’t high enough), would drop more money to the bottom line on their P&L as profits.

That means they would distribute the extra profit to their shareholders, and/or commence even more stock buybacks than they have been doing, which would increase shareholder value, but in any case no one else would benefit except the wealthy stockholders.

(2) Those companies that have the ability, would also use the extra profits to invest in jobs overseas, as they have been doing for the past 30+ years, so we would end up losing even more jobs than previously, which would further damage our economy.

The ONLY time we should have low taxes and low interest rates is if we have a sizable export industry, which we no longer have due to “job outsourcing” that has benefited no one except the wealthy class.

Regardless of what the wealthy say, they would NEVER use lower taxes solely to create jobs, since it is ALWAYS in their best interest to keep unemployment as high as possible. This cuts down on labor and overhead costs associated with additional employees, and creates upward pressure on prices, thus generating wage-price inflation. And inflation erodes wealthy investment, which is an anathema to them.

Last, but not least, if corporate taxes are lowered, then the “slack” in government revenue has to be made up from somewhere else in the system, meaning either higher taxes on everyone else. Since the wealthy refuse to pay their fair share of income taxes now, I think it is a safe assumption they will not allow a tax neutral exchange, and will pass it onto the middle class, just as they have will all other taxes.

Reducing “social programs” to make up for the losses is not feasible, since as I pointed out above, we already do not really have any social programs to cut.

Social Security, for example, IS completely broke because the government has been using it for decades as a “slush fund” — an “off-balance sheet” method of financing what it could not do without raising our taxes (e.g. our multiple wars, which have never shown up in increased taxes that would have tended to make the American people angry).

So now the US government is in trouble because there is no real cash to pay those retirees — especially the retiring baby boomers — out of current expenses, because through wealthy greed the US economy has crashed and is $15 trillion in debt.

All of the above, plus a whole lot of other “legalized” cheating by the wealthy class caused a massive rise in inflation, which was the real source of the “housing bubble”.

So thanks to wealthy ideas of what is “fair” in terms of taxation (i.e. the Bush tax cuts), we no longer have any jobs to bring in foreign revenue, and we are massively in debt due to bailing them out.

The reality is we can’t even pay our creditors.

I could go on, but I think you get the idea that cutting taxes for the wealthy is insane (i.e. a “working definition” of insanity is to keep repeating the same actions over and over, yet expecting a different result each time).

Is that simple enough for you?

PseudoTurtle
CPA/MBA

Posted by Gordon2352 | Report as abusive

For the benefit of those of you out there who believe from what I have said in this and other post that I am against capitalism, I am not. There is no better system for the efficient production and distribution of goods within an economy.

Having said that, I hasten to point out that THE US IS NOT PRACTICING CAPITALISM, BUT A PERVERTED FORM OF IT WHICH ADAM SMITH HIMSELF SPECIFICALLY WARNED AGAINST in the “Wealth of Nations”.

Note in the following passage from Wikipedia on Adam Smith, which I use since it is accessible to most readers and you can easily verify it yourself:

——————————————————————————————-

Smith’s statement about the benefits of “an invisible hand” . . . shows Smith’s belief that when an individual pursues his self-interest, he indirectly promotes the good of society. Self-interested competition in the free market, he argued, would tend to benefit society as a whole by keeping prices low, while still building in an incentive for a wide variety of goods and services.

Nevertheless, he was wary of businessmen and warned of their “conspiracy against the public or in some other contrivance to raise prices.”[74] Again and again, Smith warned of the collusive nature of business interests, which may form cabals or monopolies, fixing the highest price “which can be squeezed out of the buyers”.[75]

Smith also warned that a true laissez-faire economy would quickly become a conspiracy of businesses and industry against consumers, with the former scheming to influence politics and legislation. Smith states that the interest of manufacturers and merchants “…in any particular branch of trade or manufactures, is always in some respects different from, and even opposite to, that of the public…The proposal of any new law or regulation of commerce which comes from this order, ought always to be listened to with great precaution, and ought never be adopted till after having been long and carefully examined, not only with the most scrupulous, but with the most suspicious attention.”[76]

The wealth of France was virtually destroyed by Louis XIV and Louis XV to ruinous wars,[27] by aiding the American insurgents against the British, and perhaps most destructive (in terms of public perceptions) was what was seen as the excessive consumption of goods and services deemed to have no economic contribution – unproductive labour.

Assuming that nobility and church are essentially detractors from economic growth, the feudal system of agriculture in France was the only sector important to maintain the wealth of the nation.

Given that the English economy of the day yielded an income distribution that stood in contrast to that which existed in France, Smith concluded that the teachings and beliefs of Physiocrats were, “with all [their] imperfections [perhaps], the nearest approximation to the truth that has yet been published upon the subject of political economy”.[28]

The distinction between productive versus unproductive labour – the physiocratic classe steril – was a predominant issue in the development and understanding of what would become classical economic theory.

After his visit to France, Smith considers in the Wealth of Nations (1776) the gluttony of the rich as unproductive labour.

———————————————————————————————–

Note, particularly, the last sentence in the above quote. I think it speaks for itself as to what is wrong with the US economy today.

The “inconvenient truth” is that Adam Smith, the father of capitalism, would probably be horrified at what we call capitalism today, because it has become EXACTLY what he warned us against.

Most often, knowledge is the best weapon, and the ugly truth is that all of you have been lied to consistently by people who would pervert the idea of capitalism for their own benefit.

PseudoTurtle
CPA/MBA

Note: the Physiocrats, were a group of economists who believed that the wealth of nations was derived solely from the value of “land agriculture” or “land development.” Their theories originated in France and were most popular during the second half of the 18th century. Physiocracy is perhaps the first well-developed theory of economics.

It immediately preceded the first modern school, classical economics, which began with the publication of Adam Smith’s The Wealth of Nations in 1776.

The most significant contribution of the Physiocrats was their emphasis on productive work as the source of national wealth.

This is in contrast to earlier schools, in particular mercantilism, which often focused on the ruler’s wealth, accumulation of gold, or the balance of trade.

Posted by Gordon2352 | Report as abusive

@Gordon2352,

I have long said that you can create any kind of country (economic system is part of that) by the incentives and disincentives of the tax “system”. When you separate “corporate taxes” out you will get misleading data.

The great majority of “income” to U.S. corporations winds up being taxed twice. Once to the Corporation and thene again to whomever receives a dividend, etc. That’s why many new businesses are insted set up as LLC or Limited Partnerships. As a CPA you should be well aware of the pros and cons of the various options.

Under current tax regulations, even a sole proprietor can “write off” many, many expenses that would not be deductible by those who work for others and receive a salary, commission, etc. from which tax is withheld. I would sum the situation up by saying that a properly run small business is not SUPPOSED to make a “profit” on which tax is paid, but to “break even” higher and higher. It is feasible to have second homes, boats, luxury vehicles, aircraft, etc. owned and, by and large, operating expenses paid for by a business when ownership is appropriately structured and there is the necessary “business use”.

That said, U.S. corporations “sitting on cash” are allowed to accumulate lots of cash so long as they profess to intend a future business purpose credibly. It’s THEIR cash, not the U.S. Government’s.

Where it is earned outside the U.S. and not brought here, it’s none of the U.S. Governments business. What possible incentive presently exists for these companies to “…drop more money to the bottom line on their P&L as profits”?

You say that keeping “…unemployment as high as possible…cuts down on labor and overhead costs associated with additional employees, and creates upward pressure on prices, thus generating wage-price inflation. And inflation erodes wealthy investment, which is an anathema to them.” Does not the first act lead to an undesirable result? I don’t follow your “logic”.

Reducing social program benefits for those in this country illegally (some 12 million, I seem to recall, and more every nine months) and eliminating “per head” incentives for those receiving government housing, food stamps, and other government largesse that reward people to sit home and procreate instead of getting their fat backsides and getting a job would free up plenty of taxpayer dollars that could instead be used to repair our crumbling infrastructure. That, in turn, would productively employ people (create JOBS).

I agree that our government has been criminally mismanaging taxpayer dollars withheld for Social Security, and I agree that “we, the people” will pay that price. If we do not demand that those who have spent that revenue fordeit their own lavish retirements and make personal restitution to the point THEY have to retire on Social Security, we deserve to remain “victims”. The solution is NOT to “bail out” a bloated and unrepentant federal bureaucracy.

Yes, governmental “institutionalized inflation” continues to downgrade the purchasing power of the dollar as it always has. The “housing bubble” was NOT the result of this, nor was“legalized” cheating by the wealthy class. It was Americans answering the siren song of contractors selling the idea that houses always appreciate, and so the bigger, more lavish and expensive the house, the more the gain.

While true for houses the rich build for themselves with excellent custom design and excellent craftsmanship in an exclusive neighborhood, it was NOT true for McMansions built of questionable materials of questionable quality out in the middle of nowhere in a new community that had to build all new infrastructure at high prices and high interest rates. The mortgage lenders that convinced average Americans that they wanted to pay taxes, utilities and maintenance to live in these huge monstrosities 20-30 years and that the American economy would rise without hesitation sold a “bill of goods” not unlike the proverbial Brooklyn Bridge.

I actually agree that America needs to return to a more progressive income tax but it also needs to fairly index the Alternate Minimum tax (which has become inequitably confiscatory, not being indexed to inflation). “We, the people” would be trying to put out a fire with gasoline if we allow this Congress and this President more tax revenue, which is the crack cocaine of bad government.

They first must learn to separate this country’s needs from it’s wants and appropriately prioritize the expenditure of available funds before giving them more. A raise will not resolve the ever-increasing problems of a family that can not or will not learn to live within it’s means. Our federal economy, while more complex, must, in the end also balance.

Posted by OneOfTheSheep | Report as abusive

As I said previously, I will not attempt to reply to your ranting, especially since they are personal in nature, and really have no merit in fact.

It is a favorite tactic of those who do not understand what someone is saying to attack by nitpicking what little they do understand.

You appear to “fade in and out of reality” most of the time, so nothing you say forms any kind of coherent argument that makes any sense.

I was curious, however, why you did not attack my comments on capitalism, since THAT is the crux of the whole problem we face today.

The wealthy have been running a massive scam on the American people by deliberately lying about what capitalism and free trade is supposed to be, and no one seems to understand that simple fact.

The people running this county are EXACTLY those that Adam Smith warned us about. We are being swindled by them, and swallowing it “hook line and sinker”.

NOTHING ELSE ANYONE SAYS MATTERS, EXCEPT THE FACT THAT THEY ARE DELIBERATING STEALING US BLIND, AND ALL THE LEGISLATION PASSED BY THIS GOVERNMENT IS DESIGNED TO FACILITATE THAT FACT.

Most of these people belong in jail, or worse. They are criminals who are destroying this country.

Now, care to share your extensive knowledge and experience on how the remarks from Adam Smith — the bedrock of the wealthy argument for free trade — applies to our current situation?

Especially what you think we should do about it?

The rest of the wealthy arguments for taxes and free trade are mere distractions, designed to keep the American people from knowing the truth about who and what they are.

I would like to hear your thoughts on the form of capitalism as applied by the wealthy in the US, versus what the original concept by Adam Smith says.

The floor is yours, my friend.

PseudoTurtle
CPA/MBA

Posted by Gordon2352 | Report as abusive

The US has a deep-seated, inherent loathing for taxation, perhaps due to its the entrepreneural culture and historical precedent like ‘read my lips’ and taxation without representation. In the American economic psyche, taxation is the opposite of liberty.

This however is a dangerous time to further whittle down the state’s power to tax. The federal deficit is at a record high and projected to remain as high as 1.8% of GDP until 2019. It is not due to start reducing until perhaps 2021. Combine that with the massive monetary easing of 2008-2010 and the inflation risk this creates once growth picks up and you have a handy recipe for a sovereign debt crisis of epic proportions in the medium term.

Cutting taxes is not a sustainable solution, nor is conducting a witch hunt for undeclared assets in Switzerland or Liechtenstein. The only real solution will come with a change of mentality embracing further taxation. In the US’s show-culture political scene however, that is the most heinous of offences…

Farfoor

Posted by Farfoor | Report as abusive

@Gordon2352,

It is a favorite tactic of those too intellectually lazy to organize their thoughts coherently to divert attention by accusing others of such and making “personal attacks”. Please.

To you, anything but agreement is an attack unworthy of meaningful response. It’s not about YOU.

Your fear and loathing for “the wealthy” clearly suggests that your CPA/MBA have not brought you the success and satisfaction you deem due. You infer that “the wealthy” and “the people running this country” are a single tidy conspiratorial few of incredible malice and efficiency. You don’t tell us who they are, or specifically why WE should hate them as you do. That’s simply ridiculous.

I’m not saying such oversimplification isn’t convenient, but only that it’s so inaccurate as to be without purpose in YOUR ranting. It’s not about YOU.

Friendship is not likely between our “world views”.

Posted by OneOfTheSheep | Report as abusive

OneOfTheSheep,

Please answer my specific question I posed to you about Adam Smith and those who claim to be “capitalists” today.

They may be a lot of things — crooks, liars, cheats, scam artists, con men, swindlers, thieves, etc. — but they are NOT, repeat NOT, capitalists.

This time attacking me and my personal views isn’t going to work.

I want a direct answer from you that addresses the real problem in this country — and that is the wealthy class and their greed that is destroying this nation — as described by Adam Smith in his Wealth of Nations.

Let me state it even more simply for you.

The wealthy claim that what Adam Smith said in the Wealthy of Nations is the bedrock foundation of their belief in capitalism and free trade, and that it fully justifies their actions — but their actions are in direct opposition to the principles of capitalism as laid out by Adam Smith.

What do you personally suggest we do about them?

That is the real question.

As questions go, they don’t come any simpler than that in terms of economics or justice.

————————————————————————————–

Let me remind you once again of exactly what Adam Smith said:

Nevertheless, he was wary of businessmen and warned of their “conspiracy against the public or in some other contrivance to raise prices.”[74] Again and again, Smith warned of the collusive nature of business interests, which may form cabals or monopolies, fixing the highest price “which can be squeezed out of the buyers”.[75]

Smith also warned that a true laissez-faire economy would quickly become a conspiracy of businesses and industry against consumers, with the former scheming to influence politics and legislation. Smith states that the interest of manufacturers and merchants “…in any particular branch of trade or manufactures, is always in some respects different from, and even opposite to, that of the public…The proposal of any new law or regulation of commerce which comes from this order, ought always to be listened to with great precaution, and ought never be adopted till after having been long and carefully examined, not only with the most scrupulous, but with the most suspicious attention.”[76]

——————————————————————————————–

Or is it you still don’t understand the question?

PseudoTurtle
CPA/MBA

Posted by Gordon2352 | Report as abusive

Let me put it very simply.

If we deal effectively with our “wealthy problem”, ALL the numerous issues that seem so urgent will either go away, or be greatly reduced.

(1) But first we must understand what the problem actually is — and that is the growing power and legislative influence of the wealthy class in this country, which is steadily draining the US economy of its wealth and resources for their own benefit.

(2) Then we must focus entirely on solving the problem, no matter what it takes to get that done as quickly as possible.

Yes, the “solution” to all of this chaos — unemployment, tax issues, social programs, government overspending, trade imbalances, and our immense national debt — really IS as simple as that.

It’s not “rocket science”.

All the American people have to do is to “follow the money” and they will quickly see who and what is the problem.

“IT’S THE WEALTHY, STUPID!”

PseudoTurtle
CPA/MBA

Posted by Gordon2352 | Report as abusive

It’s good to see the physiocrats mentioned in the context of modern tax policy. Their theories were further developed by Henry George (altho he did not know of them when he wrote “Progress & Poverty”), and in modern times are expounded by those who call themselves Georgists or geoists. The focus is that taxes should be on privilege, not production, and among the privileges are the right to exclude (from land, but also some kinds of “intellectual property”) and the right to limited liability, which is what governments grant to corporations.

The efficacy of this approach in promoting economic growth and a just distribution of income is documented extensively. A good starting point is the book “Land Value Taxation around the World.”

Posted by rentpayer | Report as abusive

@Gordon2352,

I choose not to enter a debate about Adam Smith, his book and it’s relevance today. To you it’s the Bible and he’s God. Either way, I couldn’t care less. You do not seek intelligent discourse, but to intimidate others into accepting YOUR opinion(s). What possible reason is there for me to indulge or encourage you?

Since I’m not a politician and I’m not running for office, until I become the paid defender of “The wealthy” my time is mine (not yours) to command. I comment when inclined on subjects that interest me. This doesn’t.

You state: “The wealthy claim that what Adam Smith said in the Wealthy of Nations is the bedrock foundation of their belief in capitalism and free trade, and that it fully justifies their actions — but their actions are in direct opposition to the principles of capitalism as laid out by Adam Smith.

What do you personally suggest we do about them?”

No one can “do” anything until you properly define “The wealthy” and specifically identify when, where and how “the wealthy” claim anything or attempt to justify anything. Accordingly, I offer no suggestion(s). Ask someone else. You’re the one jumping up and down yelling the sky is falling, not me. The “burden of proof’ is yours, not mine.

You look to others to explain why academic “cause and effect” economic theories are imperfect in predicting real world situations. Not my “bag”. “Cause and effect” observations are more my interest(s). Until I become the paid defender of “The wealthy”, my time is mine, not yours, to command.

Posted by OneOfTheSheep | Report as abusive

Just shift taxation to favor domestic employment.

Simple one would be to make offshore outsourcing only partially deductible and then reduce corporate tax rate for domestic earned $.

For small business, it has been over 25 years that the $50,000.00 threshold at 15% has not been raised. Inflation adjusted, it is time to tax at least the first $100K corporate earnings at 15%. When you consider California the overall rate will still be ~ 25%.

Posted by robb1 | Report as abusive

touche Gordon 2352!

Posted by lhathaway | Report as abusive

OneOfTheSheep -
ALl that blather about leave the corporations and their leaders alone, if they make money in another country, and bring it back here to enjoy, it’s none of our business… that is a bunch of hogwash, and you know it, but if you insist on that idea, then I would suggest that you add to it, that: DOn’t count on the US to protect your foreign interests, and move your family to whatever country you make your money in, and let them protect you, and provide infrastructure for you to enjoy… if you benefit from the US, ie. living here, and enjoying the benefits of that, then you better be willing to pay your share to protect it, and maintain it… otherwise take your BS and move to wherever you think it might be better..

Posted by WD7179 | Report as abusive

Robb1 & Ihataway,

You say, “Just shift taxation to favor domestic employment. Simple one would be to make offshore outsourcing only partially deductible and then reduce corporate tax rate for domestic earned $.”

Unfortunately, this would be no more effective than to “reposition the deck chairs on the Titanic, since the ship will still sink anyhow”.

Making “offshore outsourcing on partially deductible” — assuming you could get the international companies to agree, which is extremely unlikely, since that is the most lucrative part of their income — will not even put a slight dent in the problem.

The ugly truth is that we have lost 90% of our manufacturing base, which is a MAJOR problem, since only export revenue gives the US economy the external source of revenue it needs.

And the loss of that revenue is why the domestic economy (i.e. consumer spending and housing) is currently tanking.

To put it in perspective, if you personally lose your well-paying job, yet continue to spend as you did when you were “raking in the dough”, think about what would happen to you and your lifestyle.

When the US lost its well-paying export industry to 3rd world countries — aided and abetted by wealthy-promoted US government legislation under the guise of “free trade” (which it wasn’t) but then continued to spend like a “drunken sailor”, the result of that is what you are currently seeing in our economy. It’s really as simple as that.

Your “solution” is no better than taking a part-time job somewhere, yet still expecting to make all the payments you were obligated to make before, when you still had your well-paying job.

In that situation, which is what I am talking about, “somethings gotta’ give”.

Until now, the US has managed to avoid the inevitable collapse by going further into debt by “borrowing” massive amounts of money, mostly from China (the proof of which shows up in our negative trade accounts).

But we are so far in debt, that our credit card is about to be cancelled, and when that happens our creditors will want the “pink slip” to everything we own (think Greece, but on a truly MASSIVE scale).

The reason this excessive borrowing has not shown up in higher costs of living for the consumer to this point is because the US government has been “capitalizing” the debt — putting it onto our national balance sheet — instead of allowing it to pass through to the US consumer, which would have meant stagflation quite some time ago.

This is what Bernanke has been doing since we bailed out the wealthy bankers in 2008, and in his QE programs since then — capitalizing our debt and putting it on the federal balance sheet, which we as taxpayers legally owe our creditors — ALL of that to benefit the wealthy.

China, for example, managed to do this successfully for over 30 years — managing to grow at double-digit GDP — ONLY because they did exactly the same thing. The Chinese government “absorbed” their excess profits they were earning from trading with the US, instead of allowing it to pass through to the Chinese people.

Now, however, since the crash of 2008, the Chinese have been forced to allow the pass-through of all that 30+ years of profit, and their domestic inflation is soaring as consumer price shoot up, and the Chinese consumer is NOT happy about having to deal with that inflation.

As I said, the US government has been doing essentially the same thing, but in reverse, by capitalizing 30+ years of debt due to free trade, which has thusfar prevented the buildup of inflation, but now it has no choice to allow all that debt to come through to the consumers.

And when that happens — stagflation that will make the 1970s look like a walk in the park.

The only known cure for stagflation is to force a “rebalancing” of the economy (think of it as government “tough love” to make up for what they have done) — by a “Volcker-style” increase in the fed rate, which WILL stop stagflation, as it did in the 1980s.

BUT the result WILL be an immediate increase in the cost of living and the economy WILL crash very hard. The “Volcker-recession” is only a sample of what MUST come in order to get rid of our massive debts.

So, doing some simple arithmetic, it means that to compensate for that tiny shift in job outsourcing as you suggest, we can only “reward” international corporations to create jobs here by an amount so infinitesimal they would laugh themselves silly.

One of the MAJOR problems is that there is NOT a one-to-one correspondence between US jobs and 3rd world jobs. So, you would have to factor in the truly MASSIVE amount of profits being generated by outsourced jobs is also a MAJOR factor in why they do it.

With the difference in direct pay, benefits and taxes, there is NO way we could offer ANY inducement to make a partial reversal of “outsourced jobs” — it’s either all or nothing.

And that is the job of Congress — NOT Bernanke, who is attempting to make foreign trade policy by using the Fed, which is doomed to fail, and he should know that. The Fed CANNOT create jobs. ONLY Congress can do that by creating favorable trade legislation for the US investors and workers.

THIS is the failure of our government. Congress has been passing “free trade” and favorable tax legislation to encourage the outsourcing of US manufacturing jobs — at first, but now even service jobs are going, which should give you some idea of how serious this has become — ALL at the behest of the wealthy class who have managed through various means (including lobbying, which is nothing more than “legalized bribery”) to corrupt our government beyond repair.

This is highly visible by the “stand-off” between the Republican and Democratic parties, each vying for power at the expense of our nation, so we are essentially in a “gridlock”. Both parties are fighting for “their” backers, and do not care what happens to the American people any longer — especially the middle class which was the backbone of this country’s economy.

It is important to realize our “backbone” as a nation, was the rise of the middle class after WWII, but it has been steadily eroding for decades as the wealthy continued to seize more legislative power for themselves.

Hence, the ONLY solution is for our government to immediately begin to reverse the supposed “free trade” policies of the past 30+ years, which is the minimum necessary to get our manufacturing export industry jump started again.

Even then, I think our economy CANNOT be “saved” at this point, since the cumulative damage done to it over the last 3-4 decades has finally dealt it a fatal blow from which we cannot recover. The very best we could hope for is a mitigation of the collapse to come, but they CANNOT be avoided at this point in time.

For small business owners, when the US economy goes into another severe recession, or worse, shortly most of you will not survive.

I stand by what I said above.

Cutting taxes for the wealthy class is “insane”, because it will only make matters MUCH WORSE for everyone else before we collapse.

PseudoTurtle
CPA/MBA

Posted by Gordon2352 | Report as abusive

By the way, to reinforce what I am saying you might want to check out the one of the other articles in today’s Reuters, entitled “A shrinking middle class means a shrinking economy” By Alan Krueger January 13, 2012.

The ONLY problem is have with it is that it attempts to present the current growing income disparity as the fault of no one single class, which is wrong.

It ducks the real issues, by letting those responsible “off the hook” and focuses on the collateral damage done to the US economy.

It is important to realize our situation is NOT some natural disaster — like a hurricane, tornado, or earthquake — but MAN-MADE, which means that there are specific people responsible for this, and they should be punished according to their crimes.

As I said above, we must first understand what the problems is before we can do anything about it. Unfortunately, for most people that seems very difficult to comprehend.

As I said “follow the money” and it WILL lead you to those who are guilty.

PseudoTurtle
CPA/MBA

Posted by Gordon2352 | Report as abusive

@Gordon2352

Clear and cogent -

Posted by lil36 | Report as abusive

To Gordon2352: I wish I had the time, energy and knowledge, to analyze in such details as you.

Limiting outsourcing deduction and lowering corporate tax for small business will encourage foreign productive investments to generate jobs here in the US, both from domestic and foreign corporations. There is no other “kind/subtle” way to reverse the “20-30 years course” unless you are for an all out trade war and a subsequent massive recession.

Simply put, you have to make our job environment more competitive with the rest of the world.

Raising taxes will just do the opposite. This does not mean and it is not related to increase the income disparity between classes.

Posted by robb1 | Report as abusive

I have just waded thru the original article and all of the comments produced thereafter. I am an office worker and understand economics just as well as I do brain surgery which is to say not in the least. However, I felt compelled to say THANK YOU to Pseudo Turtle for the clear, although I would not say concise, discussion of what’s going on in our country. I, and many other people in my world, have felt for a long time that something was very amiss with the US but was never able to find any discussions that did not make me more confused than before I read their article. I found it to be wonderfully illuminating and rather frightening. It also made me feel less than hopeful about my future in particular & very sad about the US future. If I understand you correctly, it only took us 200 years to completely mess things up with no hope of reprieve. Be that as it may, thank you again for sharing your perspective on what is obviously well understood and passionately felt by you and hardly at all by the 99%. My portion of the silent majority has been enlightened.

Posted by shopgirl | Report as abusive

robb1,

I understand what you are trying to say, that by “tweaking” the US economy by “limiting outsourcing deduction and lowering corporate tax for small business will encourage foreign productive investments to generate jobs here in the US, both from domestic and foreign corporations.”

Unfortunately, the ONLY way to make the US economy globally competitive is to reduce our cost of doing business lower than the global competition, otherwise US and global investors have NO reason to invest in the US economy.

The ONLY way to do that is to lower our standard of living below that of a competing 3rd world country, which I don’t think any American wants to do willingly. Even China is now losing jobs to “job outsourcing” to cheaper labor countries, because their standard of living is rising, thus pricing their export economy out of the global market.

If we can’t even get our jobs back from China, at their extremely low costs of labor, how could we ever hope to become competitive enough to recapture the 90% of our manufacturing jobs that are gone already?

Also, the US is currently $15 trillion in debt, which MUST be paid somehow. That “debt service” obligation — which I believe grossly understates our true debt situation, once you figure in all the losses from the housing market, which is government debt, but does not appear on our “balance sheet” — would have to be added to our labor cost overhead, or we would go bankrupt anyhow.

Simply put, there is NO WAY to make our job environment more competitive with the rest of the world.

However, you are ABSOLUTELY CORRECT that “there is no other “kind/subtle” way to reverse the “20-30 years course” unless you are for an all out trade war and a subsequent massive recession.”

As I said, avoiding a trade war and subsequent massive recession IS the only way out of this.

So, why in God’s name would we want to choose a course of action like that?

BECAUSE MAINTAINING OUR PRESENT COURSE WILL SIMPLY MAKE OUR ECONOMIC PAIN WORSE WHEN WE DO COLLAPSE.

The difference is between an attempt at a “controlled crash-landing” or an “uncontrolled fall from 35,000 feet”, which is where we are now.

The ONLY class we can possibly turn to for the necessary “working capital” we need to “bridge the gap” between our declining revenue and our mounting debts IS the wealthy class.

This is fair because it is the wealthy class ALONE that has been the major beneficiaries from the government policies in free trade and taxes for the past 30+ years.

As a nation, we have no other source of revenue that we can possibly tap into in order to survive.

So, yes, even though raising taxes and interest rates WILL undoubtedly cause a collapse and recession, it MUST BE DONE.

There simply is NO OTHER WAY.

Sorry, although I am currently retired, that’s the plain, unvarnished truth as I see it after having worked in very senior positions for several large international corporations for more than twenty years.

So, I DO understand the problems involved from an insiders viewpoint, and yes I DO understand how serious they are. But unless we face up to “the hard choices” now, we can forget having any choices later.

PseudoTurtle
CPA/MBA

Posted by Gordon2352 | Report as abusive

robb1

Sorry, I misspoke in my comment above when I said “avoiding a trade war and subsequent massive recession IS the only way out of this.”

What I meant to say is FORCING A TRADE WAR and subsequent massive recession IS the only way out of this.

Meaning ALL of our free trade and tax policies that favored job outsourcing MUST be reversed — IMMEDIATELY.

There is NO other way to resolve this before US economy crashes.

I guarantee that WILL force a trade war in retaliation, but there is nothing else we can do to save this country.

These “cheap labor” countries like China knew EXACTLY what their trade policies were doing to the US — none of these foreign governments are stupid enough to believe this was ever free trade.

It has been 30+ years of Mercantilism, and we are on the verge of losing the game we have been playing with them.

The point is that it is just as much their fault as ours,

Why should we take the hit when they walk off with our jobs and money?

PseudoTurtle
CPA/MBA

Posted by Gordon2352 | Report as abusive

robb1

We have supposedly been engaging in free trade, but the cheap labor nations have been engaging in Mercantilism, defined below:

————————————————————————————–

Mercantile System

a system of political and economic policy, evolving with the modern national state and seeking to secure a nation’s political and economic supremacy in its rivalry with other states.

According to this system, money was regarded as a store of wealth, and the goal of a state was the accumulation of precious metals,

by exporting the largest possible quantity of its products and importing as little as possible, thus establishing a favorable balance of trade.

—————————————————————————————–

The last sentence is the key to the modern version of Mercantilism, and you should recognize it easily, since we have been the victims of it.

PseudoTurtle
CPA/MBA

Posted by Gordon2352 | Report as abusive

robb1

Although international finance can be difficult to comprehend, ONE VERY IMPORTANT THING to remember about trade, is that the concept of “free trade” as originally proposed by Adam Smith in his “Wealth of Nations” was that the very simple truth behind his argument for the capitalist system was that BOTH ECONOMIES SHOULD PROFIT FROM FREE TRADE.

If that is NOT true, then it CANNOT be free trade, but something else.

Has the US profited from 30+ years of free trade, as the wealthy say it has?

That is the real question you need to answer.

If not, then we MUST stop this “faux-free trade” because it is killing our economy.

PseudoTurtle
CPA/MBA

Posted by Gordon2352 | Report as abusive

to Gordon2352: While I agree 100% in theory, I try to be practical.

A trade war, or at least a more protective trade posture could be implemented if we restore a productive edge, partially lost in the past 30 years.

But it does not happen overnight.

We are still among the most productive in the world if not the #1, but, e.g., how could we immediately stop buying Apple stuff, if they cannot make them cheap from Asia? It would create a huge inflationary pressure and recession, if we cannot (again) adequately supply our needs internally.

It will take perhaps another 30 years, beyond our generations.

Posted by robb1 | Report as abusive

@Gordon2352,

You say: “It is important to realize our “backbone” as a nation, was the rise of the middle class after WWII, but it has been steadily eroding for decades as the wealthy continued to seize more legislative power for themselves.”

I’m sure the middle class that existed in the U.S. up to and through WW II would be surprised our nation had no “backbone” back then. It appears impossible to back up that statement with facts. Your whipping boy “the wealthy” is about as well defined in terms of membership and goals as OWS (Occupy Wall Street). Who specifically comprises this predatory economic monolith you so loathe?

I do notice and believe that the legal profession has come to exert an ever-increasing and inappropriate influence on the United States. It is true that if a small community only has one lawyer they will be starving, but when there are two or more they tend to be very well off.

That’s because some local judges “feed” them controversies to milk for extended periods without resolution. As the alternate of Arbitration rose, it, too, became the exclusive province of Attorneys. Now Mediation has gone that route.

In my area there is no longer a government of laws, but of men (local influence) from County Court, District Court, Court of Appeals and the State Supreme Court. The Federal Courts here are even worse. Attorneys discourage us mere citizens who would dare enter there, suggesting that these are more formal (expensive) and hostile to the losers (don’t dare go there if your opponent has more money than you do, they will prevail AT YOUR EXPENSE!). No judge any longer faces any meaningful accountability if they violate their oath to enforce the law as written, or if they apply the wrong law, or apply the right law wrongfully, even if intentionally and their actions or inactions clearly cause financial damage(s).

I believe this is a direct result of the number of lawyers “we, the people” have elected (and continue to elect) to Congress as “our” representatives. It seems they feather the “legal bed” whenever and wherever possible at the expense of our legitimate interests and those (lobbiests, ex-politicians and other lawyers) that “cross their palms” with political contributions. Is it any wonder there is no way to apply “conflict of interest” statutes today in the manner intended when these were originally adopted?

So, perhaps, some of these are your “guilty”? But it would be silly to suggest this bunch as ALL of your “wealthy”.

Posted by OneOfTheSheep | Report as abusive

One thing I do understand:

when someone sells me a financial product and when they use the term “insurance” and when they take my money, I expect the promised services and goods. The only way out of that, for private companies, is bankruptcy. In that process, the bankrupt’s assets are seized and used to pay obligations.

The US Government is the largest landowner in North America. It own a significant percentage of the land area of the country. It pays no taxes on this land and it pays no taxes on a myriad of buildings and other structures. It is the wealthiest organization on the planet.

The US Government has a habit of invading countries which have not attacked us. It could “afford” to fight the Southwest Asian Wars without hesitation. It invaded Afghanistan, attacking its internationally recognized Government, because the head of the country refused an order from the US President. He was ordered to turn over a guest, and refused. We invaded and have been fighting for over a decade now.

“We” can afford capricious and personal wars. But we cannot pay Social Security, Medicare, Medicaid and Food Stamps that were promised, and paid for. “We” charge the recipients of these “entitlements” money for our services. And now “we” find it inconvenient to pay up, in spite of lavish expenditures on unneeded weapons and allies.

The Federal Government should immediately turn over all Federally owned and controlled lands on this planet to a Trust Fund for these entitlements. It should pay a fair market rent for the public assets it uses. If it does not want to pay rent, it should keep out of those properties. This would be more than enough to fund all of the “entitlements” politicians want to default on.

As to foreign trade, I say you cannot measure the outcomes without a dependable and non-calculated measuring stick. Most of the damage to the USA in international markets was done via an overvalued US Dollar. It is intended to be obscure. Intended.

Posted by txgadfly | Report as abusive

robb1,

Your answer to your question is very complex — covering a multitude of economic, political and military issues that have occurred since WWII, and the US responses to those conditions — and I cannot do it in this venue in any form where it would make sense. All I can do is answer your specific points as I understand them.

—————————————————————————————

You state, “a trade war, or at least a more protective trade posture could be implemented if we restore a productive edge, partially lost in the past 30 years. But it does not happen overnight.

I understand your point, which was undoubtedly valid at some point in the past — perhaps several decades ago — when there was still time to take definitive and affirmative action to reverse the course of the US when it first began to seriously deviate off-course.

But now, even the mere hint of a push-back in US trade policy is likely to generate very severe reaction from our trading partners, all of them.

And our position is that we are literally on the edge of bankruptcy (i.e. defaulting on our debts as Greece is about to do), so half-measures are not a good idea, because it will be seen as a sign of weakness. We must negotiate from a standpoint of strength, or we will end up like Greece, being carved up by our creditors.

And we cannot “restore a productive edge, partially lost in the past 30 years” because it is not “partially lost”. In fact, we have lost 90% of our manufacturing capacity, which we will never get back again — the US no longer has any productive edge on anyone.

That is history, and we need to face the reality of what we have become, a debtor nation with no visible means of support.

You state “we are still among the most productive in the world if not the #1″, which from a production and cost standpoint isn’t even remotely true. We have massive labor costs and an overhead burden that cannot be passed onto anyone in our exports. Thus, we must find a way to either pay it, which we cannot, or devalue it somehow.

One of the major reasons the US Congress is pushing China to let the yuan rise is an attempt to devalue our debt to them, but China will NEVER agree to do that unless it is in their best interest to do so. If we have to negotiate our debt with China, we need to make them see it is in their advantage to do so, otherwise it is a waste of time.

One thing is certain, we CANNOT export our way out of this mess.

“but, e.g., how could we immediately stop buying Apple stuff, if they cannot make them cheap from Asia?”

Good question, but a moot point, since as the US dollar continues to depreciate against the world currency, nobody will be willing to sell to us, at least not at any price we can afford to pay. And I’m talking about food and energy on the global market, not luxury items.

“It would create a huge inflationary pressure and recession, if we cannot (again) adequately supply our needs internally.”

Actually, the US economy is likely to deflate down to its real value, whatever that might be at this point, until we can once again begin to rebuild our industries, mainly because we won’t be able to afford to buy anything on the global market.

“It will take perhaps another 30 years, beyond our generations.”

Probably true, but waiting for disaster to strike is no solution, since our condition continues to worsen daily.

————————————————————————————–

The only solution, as I see it, is to immediately begin to completely reverse the trade and tax legislation that has gotten us into this mess, and recoup our losses from the wealthy class, which has been the only class to profit from this. Right now, the wealthy class is the ONLY source of revenue to sustain this economy.

That would give us operating capital to get us through what we need to do, and negotiate from a position of strength with our creditors, who were glad to help us get into this mess in the first place.

At this point, there are no easy solutions, but we are already on the precipice and we are out of time.

PseudoTurtle
CPA/MBA

Posted by Gordon2352 | Report as abusive

txgadfly,

Your assertion that the US government “is the wealthiest organization on the planet” is, unfortunately, completely false.

The US government is completely insolvent at this point and becoming moe so each day, owing far more than the $15 trillion in debt it officially recognizes on its balance sheet.

The REAL reason it cannot pay Social Security, Medicare, Medicaid and Food Stamps (without borrowing more money) is that there is not enough real cash flow coming into the country to pay our bills any longer.

That is one reason why the Congress is presently “gridlocked”. The other is the wealthy don’t want to pay their taxes.

As to the issue of excess military spending, it is probably the major reason for us being where we are today.

PseudoTurtle
CPA/MBA

Posted by Gordon2352 | Report as abusive

@PseudoTurtle:

With you accounting training you recognize, of course, what concealed assets are and why people conceal them. They are concealed so they do not have to pay their debts.

The US Federal Government holds direct ownership of about 30% of the total land area of the USA. This does not count trust lands, nor the 200 miles from shore owned by the Federal Government as well. That is a massive amount of mineral rich and well located real estate. Although the Russian Government may have more land, primarily in Siberia, it is safe to say that the Federal Government is the richest organization on the planet.

Note that the Government owns all mineral rights to these lands. It collects royalties as it sees fit and as please the politicians in Washington.

And then there are all the structures. None of these items is admitted to in the Federal balance sheet, but you just try to go take control of a tiny bit of it and see what happens.

These assets, alone, are sufficient to meet Federal entitlement obligations for generations. The income alone is sufficient. How about all the Federal buildings and land in the District of Columbia and surrounding States?

The problem is much like the problem a spendthrift who spends more than he takes in using borrowed finds. He will never want to repay debt, only to run up more. Like the spendthrift, the Federal balance sheet must be used to pay Uncle Sam’s debts.

Uncle Sam has developed a very bad war habit, and permits small minorities of his People to start war after war. The reasons to begin are thin. The reasons to continue are thinner. That is where the ax must fall. And the so-called “black” budget that is officially Secret and hidden from the public. We have no idea at all how large it is. It could be even larger then the public “white” budget. The black budget must go.

At any rate, the Federal Government also possesses the right to print as much money as it wants, and to sell as many bonds at whatever rate that it wants. It has huge, huge assets.

Let them pay their debts to the American People and stop trying to fight useless “Hobby” wars fought for the benefit of foreign powers. They have the money. They just do not have the integrity.

Posted by txgadfly | Report as abusive

Perhaps I should apologize for my brevity in the wake of such learned and detailed dissertations, but quite simply we should embark on a taxation system that taxes transactions.

It would probably put the high speed algorithm traders out of business, thus the markets would lose some liquidity but I believe its a small price to pay for national solvency.

We need a lot of money to pay our nation’s operating expenses and a lot more to pay down our national debt. We can’t get a lot of money by taxing the impoverished or the unemployed. We have to go where the money is.

Posted by breezinthru | Report as abusive

breezinthru,

Sometimes brevity is a relief.

A “transaction tax” (which I believe is being tried in the eurozone) is far too limited in scope to be of any use, and most importantly it would simply be passed on by the bankers to their customers, and ultimately to the American people.

You are absolutely correct in that “we have to go where the money is”, which means forcing the wealthy to redistribute their ill-gotten gains back to the people they stole it from.

Common sense says they certainly aren’t going to do it on their own, no matter how bad the US economy becomes.

As I said above, that requires Congressional action to reverse ALL the wealthy-oriented legislation passed in the last 30+ years.

Only that action would give the US economy and the American people a shot at surviving what is to come.

Frankly, I think it will be “business as usual” until the economy suddenly “gives way” and collapses, which I believe will be sometime in 2012, at which point it will be too late to do anything.

This is the reason for my urgent tones.

I believe we are about to experience another major collapse as we did in 2008, but the global economy is much weaker and not likely to survive — certainly there is no question of more bailouts because we no longer have any money.

I know I have probably offended many people by my remarks against the wealthy class, but it was not meant to be personal.

It is the steadily increasing corruption of our government by the wealthy class over the past 30+ years that is the direct cause of the US being in serious financial trouble today.

THAT fact is ALL I wanted to point out to people.

Since Reuters seems to be shutting down this site for comments, I will no longer check it for comments.

But I think I have had the opportunity to say what I felt needed to be said.

Truthfully, I am surprised Reuters allowed me to continue to say the things I was saying, and I thank them for that.

I wish more people would speak up.

You state that “We need a lot of money to pay our nation’s operating expenses and a lot more to pay down our national debt. We can’t get a lot of money by taxing the impoverished or the unemployed. We have to go where the money is” sums up very nicely what I have been trying to say in my own way.

Regards,

PseudoTurtle
CPA/MBA

Posted by Gordon2352 | Report as abusive

Sorry, I just couldn’t resist this because it proves this point I made in one of my comments above, which a repeat the relevant portion below:

If we dropped corporate taxes in the US, basically two things would happen:

(1) the US corporations, who are already sitting on more cash than they have at any time in our history (but simply refuse to invest it in this country because the returns aren’t high enough), would drop more money to the bottom line on their P&L as profits.

That means they would distribute the extra profit to their shareholders, and/or commence even more stock buybacks than they have been doing, which would increase shareholder value, but in any case no one else would benefit except the wealthy stockholders.

——————————————————-

From an article in Bloomberg today, Jan 17th:

U.S. Market Shrinks Amid Heavy Share Buybacks

By Michael Patterson, Whitney Kisling and Inyoung Hwang – Jan 16, 2012 10:39 PM PT

“Stocks are getting scarcer in the U.S. for the first time since the bull market began as companies cut share sales to the lowest level since 2006 and buy back equity at the fastest pace in four years.

Amgen Inc. (AMGN), Hewlett-Packard Co. (HPQ) and 1,971 other U.S. companies repurchased $397 billion of stock last year, while they issued $169 billion of new equity, data compiled by Birinyi Associates Inc. and Bloomberg show.

The combination reduced the Standard & Poor’s 500 Index divisor, a measure of outstanding shares, by 0.6 percent last quarter, the first drop since March 2009.

Shrinking supply supports prices and shows valuations are so low that executives would rather buy back shares than spend the cash to expand, according to Columbia Management Investment Advisers LLC and USAA Investment Management Co.

———————————————————-

THIS IS PROOF POSITIVE OF MY ASSERTION ABOVE THAT IF WE LOWERED CORPORATE TAXES, THE EXTRA PROFITS WOULD BE SPENT ON STOCK BUYBACKS TO ENHANCE STOCKHOLDER WEALTH — NOT TO CREATE JOBS IN THE US.

PseudoTurtle
CPA/MBA

Posted by Gordon2352 | Report as abusive